And Now for Something Different About Nonprofits and the Economy 1/1/09

Unhappy New Year! . . . as the nonprofit chorus seems to be singing. As if we don't need more troubles on top of the ultra-negative projections about the economy, the advice about what nonprofits should do is depressingly empty. Whenever we see something like "Fundraising in Challenging Times," we feel compelled to read it: What if the magic answer's here?! But after reading these articles and hearing these speeches, we feel, well, unsatisfied.

Scanning dozens of "what to do" lists recently, their lack of nutrition seems to fall into three groups. A lot of the advice is too abstract and even pious: "Focus on the mission" or "Be strategic." I'm reminded of a nonprofit exec from the for-profit sector who reflected that she had given out such advice as a board member and then, when receiving it as an executive director, couldn't believe how obnoxious it was. Other suggestions such as, "Monitor expenses closely," and "Delay the start of capital projects" are good advice but kind of "duh." And then there's the good advice (like "Diversify your revenue streams") that's good advice the same way "lose weight" and "achieve inner peace" are good advice: the reason we aren't doing it isn't because it hadn't occurred to us.

As is too often the case, the advice from the philanthropic-consultant industrial complex is enough to make a person depressed or even angry. I heard a well-known nonprofit guru tell an audience, "And when we were really stuck about what to do, I picked up the phone and called my friend Al Gore." I felt like throwing a shoe at him! How is this a replicable, usable strategy?

Here are four ideas that may or may not be better than the others, but at least you may not have heard them before:

1. Declare an emergency. When people have permission to think and act out of the normal grooves, they can be bolder, more creative, energized, or at least more ready to accept changes. So say it out loud: "We are in an emergency period (or we are going into an emergency period). Our funding looks okay through the next four months, but there's a good shot we'll get some bad news starting then. We need to start making changes and coming up with some contingency plans that go beyond what we've done before." An emergency doesn't mean people should panic . . . an emergency means considering the bold and wacky ideas that are either brand new or used to be off the table.

2. Schedule worrying for later. Your nonprofit may be on a growth curve, and/or you have looked at your revenue projections and things are okay. Don't feel guilty if you aren't worrying just because everyone else is. And for many people, it's smarter not to make decisions until, for instance, you hear from the county agency that funds you or you see what the February dinner brings in. Instead of worrying, try a few scenario exercises: "Let's imagine that by next quarter we've heard that our biggest grant won't be renewed. What will we wish we had done three months before?"

3. Do less with less. Of course there is more need, more demand, and we probably have less money. And we love the gritty heartfelt nature of the cry, "We need to do more with less!" Pause. But it's not only unsustainable, it probably means you will be able to do even less in the future. If a program's funding has been cut by 30%, you may need to do 30% less. The best decision may be to be open fewer days a week, hold fewer performances, or stop taking children over 5. On the other hand, working harder might be necessary, at least for awhile, but only if it's to get to a different business model.

4. Ask for help, even if you don't know what would help. Yes, I'm talking about you executive directors. Especially you. As an ED watching the gruesome implosion of a nearby nonprofit, I once said to a fellow ED, "There but for the grace of God go we." She disagreed: "That wouldn't happen to us. We would ask for help." I realized that as executives we only like to tell the board about a problem if we already have a solution in mind. It's much harder to go and say, "Help. I don't know what to do."

5. Call a community summit on your behalf, and see if they can support you. In the end, we can only do what our constituents will support us to do. A near-broke community center we know called together their funders, friends, and community leaders and laid out their situation. In effect they said, "We know we've made mistakes and that we're still flawed. If you all think we're worth saving, we need you to save us now. If you - our constituencies - can't or won't step in, we can't do it on our own. And now we're going to leave the room so you can discuss what you can do or can't do to help us."

A colleague once told me his "Four Commandments": a) Show up. b) Pay attention. c) Do your best. d) Let go. What more can any of us do, really?

* This issue we have a great article on requirements for evidence-based practice: what it means, what's good about it, how to get around the bad parts. And a Board Cafe column on conducting a 360 Degree Look at your organization. Here's to a good year for all of us. --Jan Masaoka

Jan!
Why hasn't the Obama Administration approached you (or mebbe they already have) to fill a newly created Secretary of the Nonprofit Sector cabinet position? Is there an online petition we can sign to move that along? Thanks for the sage counsel, per usual.
PEACE
~ Johnny Manzon-Santos, Chair, Ice Bridges Inc.

I've got a fifth idea -- although it certainly has been heard before: Give up turf! Look around you. How can two or three organizations do more together than they can individually? Then put your resources - time and money - on the table and work together to make things happen. I've been in this sector for more than 30 years and I have yet to see community-wide, real collaboration. If ever there was a time for this to happen, now is it.
P.S. I'll sign that petition with John!
Liz Heath, ED
The Nonprofit Center

Love what you said Liz! I've been harping about that as well -- but it's like the old saw that if there's no one in the forest can you hear the sound a tree falling? Apparently we're all not in the forest, nonprofits are falling, no one is hearing them and thus nobody does anything to keep them from falling by learning how to lean on each other.

Okay, I admit it's a cheesy metaphor -- but this is serious stuff and being serious didn't work, so maybe cheesy will!

I couldn't agree more with Liz Heath's remarks (and Jan's always sage advice). As a former ED and current member of the dreaded philanthropic consultant industrial complex, I have seen far too many nonprofit organizations worry about self preservation at the cost of mission preservation. If more of us (staff and board alike) were willing to give up a bit of turf, pride and power, we might see like minded organizations as partners rather than competitors. Keep up the great work, Annette de Soto Beyond the Divide

Having had a long and varied history with the non-profit sector, I couldn't agree more with Liz Heath's suggestion-give up turf !! I see it as the main factor inhibiting services and growth in the sector even when times are better.

Great advice, as usual, Jan. I think it is important for EDs to remember is that it is not YOUR fault and no one should expect them to have all the answers and to magically be able to serve more people with less money. In engaging people to help and keeping an eye on what is happening down the road perhaps we can work together to find an answer.

Thanks for such great comments, guys! For those of you commenting on the "give up turf" idea: we've scheduled an upcoming issue on the topic of of "Are there too many nonprofits?" so you might want to look for it, and hopefully we'll have some unexpected ways to think about it. Jan

Great SAGE advice.....love your perspective. I would add one more, and that is to go back to the volunteers who have been shuned, dropped, ignored or left your organization and re-look at their possible future and positive relationship. You can always do more with dedicated volunteers. Ask the hard question - Why did you leave? Some bridges can be repaired and renewed energy can be had. Remember your volunteers are not only volunteering their time and there-by working the mission.....but also can magnify your financial resources IF they are included and IF they feel the organization is worth their time and effort AGAIN. Non profits were never originally organized to pay lots and lots of people; lots and lots of money - they were formed to do good with much less than required. And I always go back and remind my self of:
Paul Revere earned his living as a silversmith. But what do we remember him for? His volunteer work. All activism is volunteering in that it's done above and beyond earning a living and deals with what people really care passionately about. Remember, no one gets paid to rebel. All revolutions start with volunteers.

The most useful addition in the comments is to go back to your people you have forgotten - previous members or volunteers. The ability to get to people on line and provide more involvement and information with your web site or e-mail is a good way to reach out without expense. Our educator association is able to do more now that we have ended the expenses of print and postage and gone greener - and now we will have more instant contact with everyone and have inspired our younger members to be more involved. This has also simplified our processes that were weighing us down and made our operations more on line and user friendly.

Good insight offered by anonymous. Having worked in the sector for nearly 30 years I have seen the proportion of paid staff to volunteers alter, and the passion and flame has dimmed as we work hard to attract salaries and organisations become reliant on paid staff. Rather than being conduits for social change our organisations have settled into becoming service providers. Gail

Jan, this is a great column. I'm especially happy to hear you say "Do less with less." I've been saying this for months now and the response has been stunned looks. One ED asked, "so you're saying that we should only serve one out of three people?". She didn't want to have to make the realistic connection between available resources and staff and program scope. Thanks for the affirmation.
Kate Barr
Nonprofits Assistance Fund, Minnesota

There's so much I like about this piece, but one bit of advice stands out: #4 - Ask for help even if you don't know what would help. This one step can be super-hard. Even harder if you are a person of color who needs always to demonstrate that you know what you're doing. Understanding that we don't always have to have all the answers can go a long way in getting us through crises.

Do what we do, live within your means. We actually are handling expenses and giving services on earned income. Don't overextend.

We are a very small non profit, focusing on programs with partners. We have participants who run the program of his/her choice and who donate back to La Vereda from the income for that program as he/she can. Many donate back 100%.

The organization does one big fundraising auction in early December, in 50/50 partnership with another non profit from our community. We focus on giving value to the local community, keeping within our budget and having fun. We pay an executive director and a janitor/handyman.

There are things we must wait to accomplish, but we maintain our insurance and open our doors. -- Mettje Swift, La Vereda Foundation, Del Norte, Colorado

This is a wonderful time for executive directors to rethink their relationship with their boards. Chief executives often times shoulder these crisis situations alone. Boards should be there as partners in good times and not so good times. Forging a partnership with governance will should enable chief executives to lead with confidence. a great goal for 2009.
--Lloyd VanderKwaak, ChildServe

Perhaps the current economic climate will force not-for-profits to act the way they always should have acted. Many have not operated strategically, have not adequately monitored income and expenses, and have not examined the market before charging forward with a project. Hopefully, they'll do these things now - and keep doing them even when prospects brighten.

Those are some of the best solutions i have heard this year! Fortunately for our non-profit we have always be completely debt free so maybe this will push more non-profits to elect a similar policy. So our donors can rest assured that their money is being spent for the current needs not to pay debt. This seems to be a huge concern for many who are giving! Thanks for your insightful perspective!

The comment by Liz Heath about collaborating is one whose time has come.
There is no doubt in my mind that there are many non-profits who have some mission overlap, which also includes personnel overlap. The administration of any organization has many functions common to all other organizations. No one wants to see personnel eliminated, but if it means saving the organization, then so be it. Outsourcing periodic services is another way to control expenses. There is an old saying, "It is easier to reduce a dollar of expenses than to raise a dollar of revenue." Exteme conditions require extreme measures.
Bill Walters
Crossroads Diversified Services, Inc.

Just this morning, I called an "Emergency" Meeting with my staff to focus on dealing with some really difficult funding issues (that is, creating contingency plans). I used your advice, and the outcome was wonderful - lots of ideas and excitement about moving forward and dealing with the challenges in creative ways. Thanks for the great advice at the perfect moment!
Mary Kimball
ED, Center for Land-Based Learning

Oh boy, you made our day, our week, our year! It's great to know that we're not only heartening for nonprofit leaders, but practical enough to be used, too. It's good to know you and your staff are thinking boldly and excitedly . . . that's what our communities need you to be doing! Thanks so much for writing, Mary . . . Jan & Lynora

Hi, Jan -- great stuff! I, too, am very tired of the gloom-doom but no new solution approach. I like your strategies (I always do) and would add a bit of philosophical framework that has been an "aha!" with my clients.
Because I work with donors, and with clients who work with donors, I have found that they respond well to a very simple analysis. It is simply this:
"We have all made financial investments that haven't worked out so well. But, because we all carry two portfolios -- financial and social investment -- I encourage you to look at this time to your social investment portfolio and see how your investments in your community (local, national, global) are yielding a huge return: you have made a major difference in the lives of people through investment in education, environment, arts, culture, social and human services. You would not neglect a good financial equity investment if it were yielding a good return -- you would invest more. With whatever you have and can, do the same for your social investments -- and watch the returns grow."
Thanks, Jan!
Kay Sprinkel Grace
kaysprinkelgrace at aol dot com

I love the "don't worry until you have to" advice. I just approved the 2% yearly increase to staff and felt guilty. I feel like I should be cutting corners like mad, but so far we haven't felt the crunch. I've talk to our biggest donors and foundations and they are all on board for the next two years. Which is as good a guarantee you can get in any year.
One organization of which I am a board member cut salaries and benefits but could give me no reason other than "the economy is bad". All their funding was secure, but they felt they needed to cut costs. So where did they cut? Salaries and benefits. Now they have low employee moral. So unnecessary!!!
DON'T WORRY UNLESS YOU HAVE TO. Such excellent advice.
R. Hoyos, ED, Tennessee Clean Water Network.

Yesterday an executive director told me she had a board member tell her "don't ask everyone for a pay roll back, which will make everyone angry: lay off two staff...that way you only have two mad at you"--a very different approach from the one our executive director is taking: with 30% reduced operating revenue, we are looking for every concievable cost cutting, and the board is committed to avoiding lay offs if at all possible because people are our greatest resource. Instead, if it comes to that, the E.D. will take the biggest percentage pay cut, with reduced pay cuts all the way down to admin staff, who will not be cut. The transparency has been a morale booster--we feel we are a team and we are fighting to save the team.

About pay cuts and layoffs - don't forget to return for our February 1 special Layoff Issue. Rita will be responding to a question on this exact concern - the options when it comes to trimming personnel costs!

Jan --
I appreciate your thinking on the "advice" that is being given out these days, especially your #3 - Do Less With Less. I can't believe the constant advice to do more with less. Many nonprofits were already working at the breaking point, now the advisors want them to work even more unpaid hours, buy more supplies with personal money, and lay off the employees who are "non-program" (that is: bookkeepers, and anyone else who pushes paper in the office?!?
The other thing I keep thinking to myself is "what about the reserve funds?" This is the rainy day they are meant for. I hope no one will say now that a year's worth of expenses is too much to have in reserve.
Christine L Manor, CPA

Susie Burdick, CEO of the Hearing Speech and Deafness Center, talks about not going into slump shoulder mode in this economy and what she is finding useful. She's been in the NP industry for 35 years and shares some of her best advice in a short video here: http://www.501videos.com/mmpr/1208/shortfallpr.html

Jan, thanks for sharing your ideas of how to lead and realistically deal with income issues in these economic times. Nothing is so damaging to employee moral as the slump shoulder mode. I encourage everyone to visit: http://www.501videos.com/mmpr/1208/shortfallpr.html and listen to Susie Burdick talk about the state of the economy and what she finds useful.

Thanks for being real, Jan. I especially appreciate the "do less with less." Very liberating. I'm proud of how my nonprofit has continued to deliver top notch programs and push hard for raising funds in the midst of all the nuttiness. Everyone is digging deep. But how long can we push this hard and continue to do so much with so little resource and delayed return on investment? We have to create the light at the end of the tunnel, rather than wait for it to happen.

Like everyone else, our arts organization in a small tourist-economy town has had to seriously take a look at our "turf" and start looking around for collaborative projects. Our new mantra is "It's amazing what you can accomplish when you don't care who gets the credit."
Try it. You'll like it.
Gail McCarthy

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